Unocal Eyes Chevron Bid

Oil Co.'s Board Rejects Higher Offer From State-Owned China Firm

(AP)  Unocal's board of directors has endorsed a sweetened, $17 billion takeover bid from Chevron, rejecting a higher offer from one of China's state-owned oil companies.

The decision by Unocal's board late Tuesday could signal an end to China's most ambitious attempt yet to acquire an American corporation. The takeover battle also had sparked debate about U.S. security concerns with the communist nation.

Chevron boosted its offer by $2 per share to $63 per share — or $17 billion overall — shortly before the Unocal board met Tuesday night. CNOOC Ltd., an affiliate of China National Offshore Oil Corp., has an $18.5 billion offer on the table for the El Segundo-based company. Unocal's board had previously also endorsed Chevron's lower offer over the higher CNOOC bid.

In a joint statement with Chevron, Unocal's board urged stockholders late Tuesday to accept the amended bid at a shareholders' meeting scheduled for Aug. 10.

But a spokesman for China's third-largest oil company vowed early Wednesday that CNOOC was not ready to drop out of the bidding war.

"The situation with us is that we have what we consider a clearly superior, full-cash offer on the table, and it remains there," said CNOOC spokesman Ray Bashford in Hong Kong. "We're willing to continue negotiations."

David J. O'Reilly, Chevron's chairman and chief executive officer, said the revised bid was a "compelling transaction for Chevron stockholders" despite the higher price tag.

"We are pleased to have the continued support of the Unocal board of directors and look forward to closing the transaction in just three weeks," O'Reilly said in a prepared statement.

The CNOOC bid has sparked considerable opposition from lawmakers who have raised national security and other concerns.

CNOOC, which is 70 percent owned by the Chinese government, had offered $67 per share for Unocal Inc. last month after Unocal had already agreed to be acquired by the San Ramon-based Chevron.

CNOOC's bid, which totaled $18.5 billion, was considerably higher than Chevron's original offer of roughly $60 per share in a combination of cash and stock based on Tuesday's closing price on Chevron stock. That bid was valued at around $16.6 billion.

The difference in the CNOOC and Chevron bids had grown as investors drove the price of Unocal shares above Chevron's offer price.

Shares of Unocal rose 17 cents to $64.99 at the end of regular trading on the New York Stock Exchange on Tuesday. Shares of San Ramon-based Chevron rose 94 cents to $57.30.